Bitcoin Weekly Forecast: BTC might dive below $40,000

Bitcoin price is currently hovering around a crucial barrier as bulls and bears hash it out. This fight for control shows indecision among the participants and is often formed before a volatile move. Short-term investors need to be cautious about the next move, therefore, so as not to be caught off guard. 

Bitcoin price at crossroads 

Bitcoin price has slipped below the $50,000 psychological level five times over the last six days. Although the first four times BTC recovered back above it, the December 9 crash produced a daily close below it.

Price action for the next few days is crucial as it will determine or establish a directions bias. In some cases, Bitcoin price could consolidate before it violently explodes.

While it is difficult to say in which direction BTC might head, let’s assume, it is a bullish move. In that case, Bitcoin price needs to produce a daily close above $57,845 to indicate that the bulls are back in control. Doing this will establish a higher high and eventually, a higher low, which will confirm the start of an uptrend.

Even after flipping the $57,845 level, BTC needs to wade through a thick consolidation area up to $61,000.  Beyond this level, the big crypto will then have to tackle the $65,509 hurdle and eventually the all-time high at $69,000.

To trigger this scenario, BTC needs to consolidate or reverse the downtrend and produce a higher high above $57,845.

BTC/USD 1-day chart

Supporting this scenario is the daily active addresses chart, which shows that DAA is above the 30-day average of 944,000 and is currently at 1.11 million. This data reveals that despite the recent flash crashes, investors are still interacting with the bitcoin blockchain, suggesting that they are optimistic about BTC’s performance.

BTC DAA chart

Further implying that an uptrend is likely is the 365-day Market Value to Realized Value (MVRV) model, which has reset and is currently at 1%. This on-chain metric is used to determine the average profit/loss of investors that purchased BTC over the past year.

There is a chance this index might dip into the negative territory, but there is also the possibility that long-term holders might start accumulating, kick-starting the uptrend.

BTC 365-day MVRV chart

Lastly, the stable coin supply reserve on all exchanges has hit a new all-time high of $21.3 billion as of December 9. This uptick seems to have picked up pace around November 25, indicating that investors could be preparing to buy the dip if we ever get one or using the stablecoins as collateral for their existing positions.

BTC stablecoin supply reserve chart

BTC bears are not far behind

While the bullish scenario does not seem out of the realm of possibility, the breakdown of the $50,000 psychological level and $48,326 support level suggests that bears are in control. If buyers fail to rescue the pioneer crypto at these levels, there is a high chance the downtrend could deepen, knocking BTC down to $40,596, the next support floor.

If this were to happen, the market makers will likely collect the liquidity resting below this area, allowing BTC to revisit the $30,000 levels again.

In an extremely dire case, Bitcoin price could head below the July 20 swing low at $29,763 to collect the sell-stop liquidity. 

Supporting the bearish side of arguments is IntoTheBlock’s Global In/Out of the Money (GIOM) model, which shows that the next stable support level extends from $45,615 to $23,046. Here roughly 5 million addresses purchased 3.35 million BTC at an average price of $36,730.

Even if BTC might head to $30,000 or lower, there is a high chance it might revisit $36,000.

BTC GIOM

Moreover, the large transaction volume worth $100,000 or more has also dried up from 12 million on November 16 to 5.4 million on December 6. This 55% reduction indicates large institutions or whales are uninterested in BTC at the current levels.

BTC large transactions volume chart

Investors need to be cautious, therefore, and observe how Bitcoin price reacts around the $50,000 psychological level. A consolidation followed by a pump to $57,845 will suggest that the bulls are trying to make a comeback. In which case, market participants need to wait for confirmation.

If Bitcoin price continues to sell-off, then a revisit of $40,000 or lower seems plausible.